The nationalization effort of DJB was followed up by transforming the bank of circulation into a central bank with the name of Bank Indonesia. On July 1, 1953, Bank Indonesia Act started to be in force, therefore confirming Bank Indonesia’s birth and Indonesia’s monetary and economic authority. The function of a central bank, which had been done rather inadequately before, could now be done by Bank Indonesia.

Banking Overview

Banks are special and therefore must run business based on prudential principles. The functions of banks in Indonesia are basically as financial intermediary that take deposits from surplus units and channel financing to deficit units. According to Indonesian banking law, Indonesian banking institutions are typically classified into commercial and rural banks. Commercial banks differ with rural banks in the sense that the latter do not involve directly in payment system and have restricted operational area. In term of operational definition, bank in Indonesia are classified into non-syariah and syariah-based principles commercial banks